Marine re/insurer the International Group of P&I Clubs has said that it will not renew its €100 million of fall-back reinsurance protection in 2017, after changes to its reinsurance program meant the risk of shortfall has been reduced.
Recently the International Group changed its reinsurance panel, dropping U.S. based reinsurers, in order to be able to offer insurance coverage to Iranian exports and shipping.
As a result of the change, of having dropped all sanction exposed U.S. reinsurance firms from its program, the International Group now expects its risk of not receiving all required reinsurance recoveries is lower, so the fall-back protection that it had bought will not be renewed.
The fall-back reinsurance had been purchased last year as the International Group felt that there could have been cases where U.S. reinsurers participating in its Group GXL and Hydra programs may have been unable to pay out on certain claims due to the U.S. sanctions.
The fall-back reinsurance cover had never been designed to be a long-term solution to the problem and it seems that the response at this renewal to drop U.S. reinsurers from the program has now solved the potential shortfall issue.
“The “fall-back” reinsurance programme will not need to be renewed past 20th February 2017,” the International Group said in an update.
It further explained; “Placement of the International Group General Excess of Loss (GXL) reinsurance and Collective Overspill contracts and the Hydra reinsurance programme for 2017 have been completed. Due to the continuing application of US primary sanctions to the current participating US person/domiciled reinsurers, their lines on the contracts will not be renewed for 2017/18 and have been substituted with alternative capacity. As a result, the risk of a shortfall in US person/domiciled reinsurer contributions due to the current US primary sanctions has been removed, and there will be no need to renew the “fall-back” reinsurance programme beyond 20th February 2017.”